MaRS Market Insights. K 12 Education: Opportunities and Strategies for Ontario Entrepreneurs

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1 MaRS Market Insights K 12 Education: Opportunities and Strategies for Ontario Entrepreneurs 01

2 Content Leads and Authors: June Avila, Information Specialist, Market Intelligence Joseph Wilson, Education Specialist, Reviewers: Allyson Hewitt, Director, Usha Srinivasan, Director, Market Intelligence Acknowledgements: We thank the following individuals and organizations for their participation in this report: Michael Atzemis, Guidance Counsellor, East York Collegiate Institute Carolyn Acker, Founder, Pathways to Education Dr. Jeremy Friedberg, Partner, Spongelab Interactive Susan Gucci, Co-Chair, School Council, East York Collegiate Institute Krista Jones, Practice Lead, IT, Communications and Entertainment, MaRS Annie Kidder, Executive Director, People for Education Stephen Morris, Vice Principal, York Mills Collegiate Institute Shahan Panth, Vice President, Business Development, BitStrips Dr. Fraser Shein, President & CEO, Quillsoft Ltd. John Tertan, Operations Officer, Ontario Student Trustees Association, York District School Board Rob Whent, President, Online Training & Education Portal (OTEP) Inc. and all attendees at MaRS Education Cluster events over the past year. Disclaimer: The information provided in this report is presented in summary form, is general in nature, current only as of the date of publication and is provided for informational purposes only. Specific advice should be sought from a qualified legal or other appropriate professional. MaRS Discovery District, October

3 Table of Contents Introduction / 04 Opportunities for education ventures / 06 Drivers of growth in education / 06 Tightening of funds / 06 The importance of science and math education for economic growth and innovation / 06 Education technology and online education / 08 Trends in education / 09 Student-centered learning that is adaptive and personalized / 09 Increased engagement through gamification / 09 A move toward open digital content / 10 Market overview / 11 Market potential / 11 Education spending / 12 Industry overview / 13 Strategies for education ventures / 14 Navigating the system / 14 Creative funding /16 The art of co-creation / 17 Measuring impact / 19 Technology adoption / 22 Choice of legal structure / 25 What students need / 26 Involvement of parents / 29 Conclusion / 30 Ontario education ventures / 31 Bitstrips / 31 OTEP Inc. / 32 Quillsoft Ltd. / 33 Spongelab Interactive / 34 Appendix: Methodology / 36 Endnotes / 37 03

4 Introduction As it stands, the Canadian K 12 education system is one of the best in the world. Canadian students regularly place highly in international rankings gathered by the OECD s Programme for International Student Assessment (PISA) when it comes to reading, mathematics and science. 1 Our educational systems bear the primary responsibility for nurturing and developing the capacities and innovative capabilities of our fellow citizens. -OECD In a recent McKinsey report, How the World s Most Improved School Systems Keep Getting Better, Ontario was chosen as one of 20 school systems around the world that have achieved significant, sustained, and widespread gains in student outcomes on international and national assessments from 1980 onwards. 2 04

5 This cannot be solved by governments. We need social innovations to solve these problems. You need an entrepreneur who is tenacious and will not stop. - Carolyn Acker, Founder, Pathways to Education That said, there are considerable challenges in ensuring that all Canadian youth benefit from this system and achieve their highest potential. Student achievement is highly correlated with socioeconomic background and geographical location. 3 Also, despite high PISA rankings, Canada lags in its capacity for innovation. 4 To remain globally competitive, Ontario (and Canada) must continue to embrace new ways to improve student learning and outcomes. Ontario is home to a vibrant cluster of education entrepreneurs working with the education system to help improve student learning. When we talk about education entrepreneurship in this paper, we are referring to socially innovative ventures, either for-profit or not-for-profit, that have developed innovative programs or products that seek to enhance K 12 education in Ontario. Our educational systems bear the primary responsibility for nurturing and developing the capacities and innovative capabilities of our fellow citizens. 5 These types of ventures can offer innovative platforms to integrate technology into the classroom (Desire2Learn, Spongelab, SMART), curriculum-based in-class programs (ArtsSmarts, Let s Talk Science, BitStrips) or after-school programs (Girls Respect Groups, MJKO, My3P). I didn t know there were entrepreneurs in education, is a common refrain among stakeholders. The public education system is often characterized as a static bureaucracy run by civil servants. In reality, the system is constantly under flux, driven by market conditions, political realities and the tremendous store of knowledge and expertise held by researchers, administrators, teachers and other frontline education workers. We would like to recast the best education professionals as public sector innovators, and examine how their knowledge can best be combined with the entrepreneurial spirit of the private sector. Christian Bason, Director of MindLab, a cross-ministerial innovation unit in Denmark, defines public sector innovation as the process of creating new ideas and turning them into value for society. 6 Education is an ideal field for us to seek the creation of shared value, that is, creating economic value in a way that also creates value for society by addressing its needs and challenges. 7 Innovative education ventures can blend both the creation of economic value through market growth and social benefit through the increased quality of public education. The Young Foundation and the Center for American Progress, in a report entitled Capital Ideas: How to Generate Innovation in the Public Sector, claim that innovation is needed just as much in the public sector [as] public services can easily become stuck with outdated and ineffective approaches. 8 The key is to unleash a wave of entrepreneurship in education of a kind the developed world has not seen since the 19th century, says Charles Leadbeater in a position paper entitled Learning from Extremes. 9 The 20 th century was the century of the teacher and the school, the class and the exam. The 21 st needs to become the century of the educational entrepreneur. Entrepreneurs and developers external to the system have created an enormous suite of tools and programs that can be used to increase the quality of education in Ontario. Our job is to ensure that the pathways remain open to test, refine and grow the innovations that work so that they can effect change across Ontario, Canada and eventually the world. 05

6 Opportunities for education ventures Drivers of growth in education Tightening of public funds Schools are always looking for ways to control costs while still providing high quality education to students. School boards struggle with the current model of government funding that can fail to keep up with inflation and rising costs. People for Education, a parent-led organization that collects school data and conducts research on Ontario schools, reports the following statistics 10 : Fifty-six per cent of elementary schools have a teacher-librarian, a decline from 80% in Sixty-six per cent of secondary schools have a teacherlibrarian, a decline from 78% in More than 10% of the provincial budget for education is spent on special education Sixty-seven out of the province s 72 boards spend more on special education than they receive from the province In total, school boards spent $174 million more on special education than the province provided As a result, many schools rely on internal fundraising activities to pay for school supplies and special projects. A recent report from Social Planning Toronto, entitled Public System, Private Money: Fees, Fundraising and Equity in the Toronto District School Board, found that the wealthiest neighbourhoods in Toronto raised, on average, $249, per school compared to $6, per school for the poorest neighbourhoods. 11 Across Ontario, schools raised a total of $588.4 million to augment provincial funding. 12 In the US, websites such as Donor s Choose allow donors to choose which educational projects and in which area they want their money to go to. A similar website, Pick My Class, is in the works in Canada. In the UK, the tightening of public funds is often accompanied by what NESTA calls radical efficiency, which can be defined as innovation that delivers much better public outcomes for much lower cost. 13 For education, this means finding different ways to deliver the curriculum for less money, which results in better educational outcomes. NESTA charges governments not with spending more money, but creating conditions for creating inspiration, celebrating entrepreneurs, providing enabling risk capital and explicitly opening up commissioned services to new actors. 14 The importance of science and math education for economic growth and innovation Our economy has shifted from relying on manufacturing and natural resources to a knowledge-based products and services economy. To remain globally competitive, countries around the world recognize the importance of training the next generation of scientists and engineers and are actively encouraging more students to study science, technology, engineering and mathematics (also known as STEM). Canadian students have consistently ranked well on international tests that are designed to measure educational outcomes in science and math. The Programme for International Student Assessment (PISA) is a collaborative effort among OECD member countries. PISA tests the skills and knowledge of 15-year-old students in reading, mathematics and science. In 2009, sixty-five countries participated, including all 33 OECD countries. Shanghai- China and Singapore participated for the first time. In 2009, Canada had a mean score of 524 on the combined reading scale, ranking fifth among countries. Canadian students had an average score of 527 in mathematics and 529 in science, ranking eighth and seventh, respectively, among countries. 16 During the last decade, the number of college students who study math and science in Canada and the United States has declined dramatically. This is a critical problem because technology holds the key to progress, and to addressing many of the world s most pressing problems, including health care, education, global inequality, and climate change Bill Gates 06

7 Table 1: Results from the 2009 PISA in reading Reading OECD average 493 Shanghai-China 556 Korea 539 Finland 536 Hong Kong-China 533 Singapore 526 Canada 524 Source: OECD PISA 2009 Database Table 2: Results from the 2009 PISA in math Math OECD average 496 Shanghai-China 600 Singapore 562 Hong Kong-China 555 Korea 546 Chinese Taipei 543 Finland 541 Liechtenstein 536 Switzerland 534 Japan 529 Canada 527 Source: OECD PISA 2009 Database Table 3: Results from the 2009 PISA in science Science OECD average 501 Shanghai-China 575 Finland 554 Hong Kong-China 549 Singapore 542 Japan 539 Korea 538 New Zealand 532 Canada 529 In the US, disappointing performance in international rankings has resulted in several new education spending programs to improve outcomes. The Educate to Innovate campaign, launched by President Barack Obama, is designed to improve the participation and performance of students in science, technology, engineering and mathematics. The plan is to work with leading cross-sector science and engineering organizations to increase STEM literacy and promote education and career opportunities to underrepresented groups such as young women. In 2009, Cisco claimed, The future growth and stability of our global economy depends on the ability of education systems around the world to prepare all students for career opportunities and help them attain higher levels of achievement. This was tempered by recognition that, amidst an increase in educational spending in both the US and Canada, achievement did not always increase. 17 Amidst the attention paid to the importance of STEM subjects to a society s economic competitiveness, there is a growing body of research to suggest that teaching so-called soft skills such as empathy, critical thinking, metacognition and integrative thinking are crucial to a society s well-being. Educators, such as Roger Martin, Dean of the Rotman School of Business, are seeking ways to integrate such practices into traditional subjects like business through their I-Think Initiative. Physicist Basarab Nicolescu calls this process transdisciplinary thinking. It revalues the role of deeply rooted intuition, of imagination, of sensitivity, and of the body in the transmission of knowledge. Only in this way can society of the twenty-first century reconcile effectiveness and affectivity. 18 Ventures such as Roots of Empathy, Heliotrope and One Voice One Team have developed experiences designed to draw out deep feelings of empathy and community engagement. Evidence suggests that projects like this that span traditional subject areas greatly contribute to the success of students both within school and after they graduate. 19 Source: OECD PISA 2009 Database 07

8 Education technology and online education The rapid proliferation of consumer technology devices is driving a growing expectation that schools should embrace high-tech tools for children to succeed in the 21st century. Existing statistics about technology use in Canadian schools are quite dated. According to Statistics Canada, more than one million computers were available to 5.3 million students in elementary and secondary schools across Canada in More recent information supports the fact that the majority of Canadian households are connected and that schoolaged children are going online. A 2009 Telus-commissioned Ipsos Reid survey found that 75% of Canadian children who used the Internet are proficient on it by the age of seven. 21 In addition, Ontario students spent more time per week (3.2 hours per week) doing homework online than any other province. Michael Barbour conducts an annual review of distance learning in Canada. Distance learning encompasses homeschooling as well as education courses taken by students enrolled in school. While some distance learning is done using print materials, he does recognize a trend of greater reliance on the use of technology. According to his 2010 report, there is some level of K 12 distance education in all provinces and territories. British Columbia has the highest percentage of student participation. K 12 distance education enrolment in Canada is estimated to be between 150,000 and 175,000 students (or between 2.8% and 3.4% of the total K 12 student population). 22 Online education is more common in the US. The Sloan Consortium reports more than one million K 12 students participated in online courses for the school year. This is growing rapidly, representing a 47% increase since Figure 1: US spending on e-learning in K 12 is projected to grow US SPENDING ON E-LEARNING IN K Source: Ambient Insights According to a 2010 survey, about one-third of US public elementary and secondary schools offer students some kind of online learning program, and another 20% expect a program will be started by New Brunswick leads Canada in education technology. In 2004, the province implemented a 21st century learning model with its Dedicated Student Notebook Research Project that equipped students at six schools in grades 7 to 9 with laptop computers. The schools already had high bandwidth connections and wireless access. In 2006, all teachers were offered laptops and by the project had expanded to 24 schools, 156 classes and 3900 students. 25 $2.2 BILLION $4.9 BILLION In 2008, the Canadian Education Association conducted a case study (commissioned by Hewlett-Packard, which provided the laptops) that reported positive findings from teachers and students. Teachers reported improvement in the quality of work, especially from students with special needs. Students reported that they wrote more and were more engaged with the learning process. 08

9 Trends in education Student-centered learning that is adaptive and personalized A personalized learning experience is the new gold standard in education. With the educational community s acceptance that students in any class employ multiple intelligences, it is clear that the one sizes fits all model of traditional 20th century education is no longer enough. 26 However, the reality of the classroom environment, with diverse students of varying abilities and willingness to learn, rarely permits this. Many education technology products and services promise to provide this personalized instruction, allowing students to do work based on their individual needs, skill levels and interests. Figure 2: Student collaboration STUDENTS USING THE INTERNET DAILY TO COLLABORATE ONLINE WITH A GROUP OR TEAM IN CANADA STUDENTS USING A COMPUTER DAILY TO COMMUNICATE THROUGH OR CHAT ROOMS IN CANADA Source: OECD The Khan Academy is now famous for its online video tutorials and practice exercises that enable students to work through problems at their own pace. Windsorbased OTEP Inc. (see full profile in Ontario Education Entrepreneurs section) is trying to tailor student learning based on an individual student s specific learning profile. Quillsoft, which is located in Toronto (see full profile in Ontario Education Entrepreneurs section), provides helpful cues to prompt students with writing difficulties when they are writing on computers. This kind of customized learning and assessment frees the teacher s time, allowing her to focus more attention on students that need it most. Increased engagement through gamification Student engagement is an issue in many classrooms. A 2011 survey by the Canadian Education Association showed that most students in grades 5 to 6 are intellectually engaged in their learning but that this engagement falls by grade 7. By grade 9, less than 50% of students are engaged in their studies. 27 School attendance decreases from a high of 90% in grade 6 to a low of about 40% by grade The use of technology can help to address this problem and increase engagement. Learning becomes a more active experience, stimulating students at a deeper level. Many education products employ the principles of gamification, which is the use of game mechanics in nonentertainment environments to change user behavior and drive engagement. 29 The use of games to teach students is not new and the importance of play in facilitating learning has long been recognized. Today s technology provides for an even more immersive experience. Toronto s Spongelab Interactive uses gaming principles and 3D environments to teach students about biology (see full profile in Ontario Education Entrepreneurs section). Practi-Quest uses interactive role-play to educate students about bullying. Games increase enjoyment for students by providing rewards and feedback, which can improve students attitudes toward learning traditionally challenging subjects like mathematics. Studies trying to show whether educational gaming increases learning have been mixed, but they have shown increased student engagement and motivation

10 A move toward open digital content Digital content provides teachers with a large number of resources from which to design their lessons. Online information is often more relevant and timely so that students are no longer limited to learning from dated textbooks. Teachers even have access to content from the world s greatest universities, such as Harvard, MIT and the UK s Open University. The trend toward making digital content open is creating a wealth of reusable resources for teachers. 31 Communities for sharing these resources are growing, making it easier for teachers to create, share and incorporate digital content into their curriculum. Toronto companies are also contributing to the open digital movement. Teachers create curriculum elements for Bitstrips for Schools (see full profile in Ontario Education Entrepreneurs section) to share with other educators for re-use. Spongelab Interactive has created an online Global Science Community that will enable teachers and developers to swap digital educational content. Wero Creative is in the process of developing Kidoid, a platform that rates and shares online educational games. Curriki is another global K 12 community. The not-forprofit organization is a product that resulted from the Global Education and Learning Community (GELC), a project started by Sun Microsystems to develop content for education in a collaborative way. The website contains more than 40,000 free learning resources for teachers. 10

11 Market overview Market potential In K 12 public schools, student enrolment across Canada has decreased each year for the past decade but this does not mean fewer opportunities for education ventures. While enrolment is on a downward trend, the number of students enrolled in special needs education and second-language immersion programs has risen. As operating costs rise, schools are challenged to provide the same level of service with less money. Figure 3: Ontario s student enrolment IN ,061,390 STUDENTS ENROLLED IN ELEMENTARY AND SECONDARY SCHOOLS IN ONTARIO Source: Ontario Ministry of Education In contrast with Canada, US enrolment has been on an upward trend. The total number of students enrolled in public prek 12 schools is projected to increase from 49.3 million in 2008 to 52.3 million in 2019, up 6.2%. 32 In the US, the Individuals With Disabilities Act (IDEA) serves special needs students. In , 6.6 million children received IDEA services, or 13% of total public school enrolment. 33 Table 4: K 12 market snapshot, CANADA 5,088,789 STUDENTS 375 SCHOOLS BOARDS* 15,000 SCHOOLS* 10,100 ELEMENTARY 3,400 SECONDARY 2,000 MIXED ELEMENTARY AND SECONDARY 392,632 FTE TEACHERS $55 BILLION TOTAL EXPENDITURE According to Statistics Canada, just fewer than 5.1 million students were enrolled in publicly funded elementary and secondary schools during the academic year, down 0.5% from the previous year. This is down 5% since ONTARIO 2,070,736 STUDENTS 72 SCHOOL BOARDS 4,923 SCHOOLS 4,026 ELEMENTARY 897 SECONDARY 157,303 FTE TEACHERS $22.48 BILLION TOTAL EXPENDITURE Source: Statistics Canada, Summary Public School Indicators. Council of Ministers of Education website: *Numbers are approximate. In , public school enrolment increased in Alberta (3%) and Nunavut (6%), with all other provinces and territories seeing decreases. The largest decrease was in Newfoundland and Labrador, where enrolment dropped 22%. Other Atlantic provinces also experienced large decreases: 15% in Nova Scotia, 13% in New Brunswick and 12% in Prince Edward Island. Demographic and migration shifts continue to alter the population distribution across Canada, affecting school enrolment across the provinces and territories. 11

12 However, enrolment in specialized programs has risen. In , about 317,000 students were enrolled in a second-language immersion program, an increase of 14% over Ontario accounted for the largest number of second-language immersion students in , with enrolment over 167,000. Special needs enrolment has also increased. More than 583,000 students were receiving partial or full-time special needs education in , up 3.2% from (These statistics exclude the Yukon and Nunavut.) Total expenditures in Canada s elementary and secondary schools was $55.0 billion in , up 7.1% from Since , spending has risen by 32.8%, more than double the rate of inflation as measured by the Consumer Price Index. This money is then disbursed to the individual schools within each board based on student enrolment and the needs of its population Total expenditures in Canada s elementary and secondary schools amounted to $55.0 billion in Figure 5: total expenditures in public elementary and secondary schools as a percentage of total expenditures by provincial and local governments Figure 4: full-time equivalent enrolments in public elementary and secondary schools 2,000,000 1,958, NL PE NS NB QC ON MB SK AB BC YT NT NU 1,800,000 1,600,000 Source: Statistics Canada Summary Public School Indicators for Canada, the Provinces and Territories, to ,400,000 1,200,000 1,000, , , , , ,255 20, , , ,251 NL PE NS NB QC ON MB SK AB BC YT NT NU Source: Statistics Canada Summary Public School Indicators for Canada, the Provinces and Territories, to Education spending 172, , , ,321 4,804 8,628 8,917 In the US, total elementary and secondary expenditures for the school year were $596.6 billion, a 6.1% increase from $562.3 billion in Recent funding programs to improve education provide some stimulus for education entrepreneurs. Race to the Top will pour $400 billion into education. The $650 million Investing in Innovation Fund (i3) was developed to encourage new approaches to boosting student achievement. Only 3% of annual global spending for education goes toward technology. The largest spending category is educators salaries. 41 In Canada, education funds come from the provincial or territorial government. Similarly, curricula and policies for all public education initiatives are made at the provincial level. 35 Taxes are collected by the provincial government and are then disbursed to the school boards in the province via supervisory officers at each board. Provincial and territorial regulations provide the grant structure that sets the level of funding for each school board based on factors such as the number of students, special needs and location

13 Industry overview The education industry includes a broad range of product and service providers. One of the largest is the education publishing industry. The US K 12 industry is dominated by large publishers Houghton Mifflin Harcourt, Pearson and McGraw-Hill. These three publishers had 52.8% share of the market in A December 2009 study by the Association of Educational Publishers found that 40% of publishers are repurposing content for digital platforms, up from 25% in According to a 2009 survey conducted by Simba Research, some of the most prevalent education technology tools in K 12 classrooms include 44 : Interactive whiteboards Student response systems Student computing devices Games Distance learning Virtual learning environments Social networking Large technology companies that do not traditionally serve the education market are leveraging their technological services or products for the education sector. Technology giants Microsoft and Google both offer cloud solutions for the K 12 market. Microsoft s which is also free, is a similar academic suite of services, offering Microsoft s cloud version of their office suite, Office Web Apps. According to their website, has tens of millions of users. This platform will be transitioning to Office 365, incorporating more communication and collaboration tools, including SharePoint and Office Professional Plus. The platform will still be free for students but fee-based for educators and staff. Google Apps for Education is a free suite built from a combination of Google s existing services, such as Gmail, Google Docs and Google Talk. According to their website, Google Apps for Education has more than 14 million K 12 and post-secondary users from around the world. Google recently became a provider of hardware to schools through its Chromebooks for Education program. Chromebooks are simplified laptops that run the Chrome operating system. They do not run software the way regular laptops do the expectation is that wireless Internet is always available which make them ideal for young students. 13

14 Strategies for education ventures Navigating the system The inability to navigate the education system is the most common barrier that education entrepreneurs identify when attempting to scale their social ventures. In meeting entrepreneurs and stakeholders over the last year, the education system was variously described as complex, sprawling and impenetrable. One representative from a private foundation, when asked whether they fund education ventures, simply said, No. The education system isn t porous enough. All entrepreneurs must learn to identify which entry point within this vast system is appropriate for their venture, and then use it as a platform to test programs and products in the classroom with the aid of teachers and students. Figure 6: Schools and school boards across Canada SCHOOL 375 SCHOOL BOARDS APPROXIMATELY 10,000 3,400 2,000 15,500 SCHOOLS: ELEMENTARY SECONDARY 10,000 3,400 2,000 MIXED ELEMENTARY & SECONDARY ELEMENTARY SECONDARY MIXED ELEMENTARY & SECONDARY Source: Council of Ministers of Education, Canada. ACROSS CANADA THERE ARE However, most stakeholders agree that access to the education system should never be completely open. Teachers, administrators, for-profit entrepreneurs and not-for-profit entrepreneurs agreed that the public education system should be protected from corporate exploitation. Entrepreneurs should treat access to public classrooms as sacrosanct and system access should be considered a privilege, not a right. Students are not customers, said one teacher. In the same way that pharmaceutical companies must face regulatory barriers to begin live clinical trials, the burden of proof should be on education entrepreneurs to demonstrate that their services are unequivocally beneficial to individual students and the system as a whole before they scale their ventures. To do this, entrepreneurs must ensure that they can articulate and validate their value proposition in a language that resonates with individual stakeholders. While stakeholders in the education system often speak to the importance of helping children to succeed, the reality is that the day-to-day lives of many administrators and stakeholders are dictated by overlapping concerns such as balancing budgets, writing reports, delivering curricula and engaging in the machinations of electoral politics. Furthermore, when approaching the education system with an innovative venture, entrepreneurs need to distinguish between stakeholders, customers and end users. In almost all cases, the end users are the children in the classrooms; however, the children often do not pay for the product or service. The cost is borne by a third party, the customer, which can be the school, the board, a private foundation or a government-granting program. Stakeholders, in turn, are all the people involved in the system who are affected by the project in some way. Entrepreneurs must know how to identify the decisionmakers for their venture, and get support from relevant stakeholders, including the teachers and students as end users. Schools across Ontario are littered with products and gadgets that were purchased by well-meaning administrators, but lay idle in classroom cupboards because buy-in was never achieved at the teacher level. Successful education entrepreneurs gain access to the system by first finding a champion who works from within. Some have suggested hiring consultants or mentors who 14

15 are used to selling into the school system, but there is significant skepticism about hiring third-party salespeople. Entrepreneurs found that they had a better reaction in the system when they worked directly to build trust with stakeholders to introduce their innovations. The bureaucracy is huge. There s one gate after another. It s important to build trust. Who are my supporters? Who are the stakeholders? - Susan Gucci, Co-Chair, School Council, East York Collegiate Institute A key difficulty in trying to effect change in any education system is its sheer size and complexity. One of the most important strategic decisions an entrepreneur can make involves determining at what level they will attempt to access the system, and where they can have the most effect. This can be very different depending on the scope of the venture, and the priorities of decision-makers at different levels. As described in Education spending, the flow of money starts with the Ministry of Education, moves down to the boards and then proceeds to schools. When funds are transferred from the provincial coffers to the boards, only the money meant for special education is sweatered, which means that it cannot be used for anything else. The rest of the money can be moved around based on the board s priorities. 45 At the school level, the money is administered by the principal, and spent by the heads of individual departments and teachers within the school. As such, there are four broad levels that have potential purchasing power directly into the classroom: Ministry, board, principal and teacher. This is not to suggest that there are no alternate means of access into classrooms or stakeholders, such as trustees and unions, that can affect what programs are implemented. However, these four levels form the traditional structure of purchasing power in the education system. At the Ministry and board levels, it is imperative for entrepreneurs to align themselves with their goals and priorities. 46 At the school level, it helps to align ventures in a way that helps the schools to fulfill their School Improvement Plans (SIPs). Schools use SIPs as tools to communicate with the boards on how they are working toward improving various aspects of their schools, including marks, school culture, assessment and equity. If you want funding, put it in the SIP, said one vice principal from a Toronto high school. Similarly, regional school boards use Board Improvement Plans to report back to the Ministry on their progress along yearly metrics. 47 As entrepreneurs move further up the chain, from the classroom level to the Ministry, more proof is required to use and endorse the product. Demonstrations and pilot programs at local schools are usually necessary for the Ministry to consider full-scale implementation. Entrepreneurs have found success by providing free product trials for teachers and using social media to engage teachers in pilot projects that fit with the priorities of a particular neighbourhood or school initiative. Several entrepreneurs shared examples of engaging individual schools that were under the radar of the board and Ministry. One entrepreneur, excited by the success they experienced at a handful of schools, was eager to approach the school board to expand the projects. The teachers at the school, however, were less optimistic. Please don t tell the board we re doing this, they said, out of fear that the program would get bogged down in red tape. (NB: This story had a happy ending. The board picked up the program and expanded it to schools across the region.) A message that shouldn t be lost in the face of frustration when dealing with an impenetrable bureaucracy is that, in many cases, the bureaucracy provides a valuable service by protecting the sanctity of our publicly delivered education system. There s a whole system in place, says Annie Kidder, Executive Director of People for Education. You can t just change one particular piece in your backyard. The barriers that provide some entrepreneurs with access over others is not due to a problem with the bureaucracy per se, but with social groups in-crowd/out-crowd mentality. It is inevitable and desirable for some barriers to be in place to protect such an important resource as our public education system. It is important for entrepreneurs to understand the map of the system and the needs of the players, as well as have evidence to back up their venture to demonstrate how it will benefit students. 15

16 Creative funding In Ontario, education entrepreneurs employ a wide range of business models and funding sources to keep them afloat. In general, best practices of finding revenue streams depend largely on the organization s structure and the service or product they provide. Considering the challenges in funding socially innovative educational programs, as they exist somewhere between a publicly delivered service and a private enterprise, education entrepreneurs frequently face barriers to raising new funds. Innovation often requires a protracted period of testing and failure, which governments are not keen to fund with public money. Public dollars cannot be used for innovation because of risk, says Carolyn Acker. Seed funding, social venture capital, from risktaking entrepreneurs whether individuals or visionary foundations is clearly required. Not-for-profit entrepreneurs difficulties with securing funding for their ventures have spurred the creation of some innovative models that fall under the term of social finance or impact investment. In Ontario, the SVX is a new listing exchange that is specifically designed to support investment for social ventures. 48 A new model called the Social Impact Bond is another tool that not-for-profit entrepreneurs can use to show that their social innovation offers a demonstrable economic benefit. Entrepreneurs would enter into a multi-sector partnership agreement whereby the innovation s cost savings are used to provide a return on private capital for new investment used to fund scaling. For more information on Social Impact Bonds, refer to the Nonprofit Finance Fund s Social Impact Bonds Learning Hub. 49 Across Canada, digital media accelerator programs in Montreal (Flow Ventures, Founder Fuel, Year One Labs), Toronto (Extreme Venture Partners, JOLT), Waterloo (Impact Ventures) and Vancouver (Bootup Labs, Growlab) have programs that provide funding, space and mentorship in exchange for a small stake in the company. For-profit education entrepreneurs can also apply to incubators or accelerators to help get their ventures to the next level. In Ontario, Research Innovation Centres (RICs), which run programs through the Ontario Network of Excellence, are designed to provide mentorship. 50 In the US, several incubators and accelerators run programs that focus exclusively on education or social enterprise businesses. Social enterprise Startl, in partnership with Dreamit Ventures, an accelerator program, offers learning companies the opportunity to participate in a three-month program in New York City. The Unreasonable Institute in Boulder, Colorado works with social entrepreneurs who pursue social or environmental change, or what they call unreasonable ideas. They ask entrepreneurs to prove their mettle during the selection process by giving 50 finalists 50 days to raise funds to cover the cost of the $8,000 program. New School Ventures, with offices in San Francisco, Boston and Washington, describes itself as a nonprofit venture philanthropy firm. The firm raises capital from both individual and institutional investors and then dispenses those funds to help improve education. The Kauffman Labs Education Venture Program and Imagine K12 are programs that incubate start-ups in the education space to prepare companies for funding requests and market readiness. 16

17 The art of co-creation The ventures that succeed in penetrating the education market are almost always underwritten by a philosophy of co-creation with the people affected by that market. Christian Bason says, Co-creation is about orchestrating a design process with citizens, businesses and other internal and external stakeholders. 51 This design process supports solutions that rely heavily on input from all stakeholders on implementation and how we might measure their success. A McKinsey report found that Ontario s education system sponsors and identifies examples of innovative practices in schools (teaching and learning practice, parent/community involvement practices, etc.) and then develops mechanisms to share these innovations across all schools. 52 Charles Leadbeater calls this philosophy mass innovation. 53 He gives an example in his 2008 book We-Think of a school in Plymouth that saw the children as part of the school s productive resources, not just as its consumers. It is imperative that entrepreneurs do not see selling into the education system as merely another channel of distribution for their products. The system s sheer size and complexity, coupled with blending social and economic benefits, requires entrepreneurs to be sensitive to various stakeholders individual needs and work with them to create a customized version of their product or service. Partnerships are the way to do it, says Carolyn Acker, Founder of Pathways to Education, when asked to describe successful integration of outside programs into the classroom. Partnerships are about collaboration and leverage. You don t go tell the teachers what to do. Pathways to Education is an adjunct, not a replacement, to current programs. The Pathways to Education program grew from a foundation of community development, which was grounded in the values of respect and power sharing. Pathways is not a top down program that governments can mandate, says Acker. In order to build community capacity, one needs to use the tool of community development. The main premise is that the community best understands its problems and the solutions to those problems. This is an attitude that should be applied to teachers understanding of their students and their needs. The online comic strip platform BitStrips continually changes its product based on suggestions from teachers who use the platform. In 2010, elementary schoolgirls wanted more skirts for their avatars, so BitStrips included these seemingly trivial changes in newer versions, showing sensitivity to students needs. As a result, more students engaged with the program and teachers felt that their students needs were being respected. To emphasize the importance of collaborating with a wide group of stakeholders, Carolyn Acker wondered aloud if the Ministry of Education should be called the Ministry of Schools. This is meant to suggest that the education of our youth is a far bigger mandate than can be handled by one isolated Ministry. Acker suggests engaging non-traditional partners, such as public health organizations, anti-poverty groups and immigration settlement organizations, in the act of co-creating innovations in education. The J.W. McConnell Family Foundation is Canada s largest private family foundation, and has been using a co-creation model in their funding of innovative education ventures for the past 15 years. They have achieved success with programs such as ArtsSmarts and Roots of Empathy by working closely with them and system stakeholders in program design. CEO Stephen Huddart outlines the process of working with social innovators to effect change in the education system. We look for partners to work in close collaboration with, to test, model, learn, share and disseminate results. We create the conditions to collaborate. Education entrepreneurs cannot expect to sell out-of-the box solutions to the education system. Since education is a provincial mandate in Canada, entrepreneurs can expect provinces, and boards within those provinces, to have different needs based on the demographics and needs of the students they serve. Grandiose projects designed to reform the entire system are not the way to go, says Huddart. Provinces are perfect labs to test approaches that match the needs of their students. 17

18 There is tremendous resistance to change in large systems, an inertia that needs to be altered from within, one small project at a time, instead of from the outside. Working together with stakeholders to understand their needs is a crucial step toward developing a shared understanding of the opportunity. This process develops trust between collaborators. Don t stand outside and expect to be welcomed in, says Huddart. One group that is often forgotten when garnering support for education ventures is that of the students themselves. John Tertan is a 17-year-old high school student in York District School Board and is the Operations Officer for the Ontario Student Trustee Association. Every board in Ontario has two or three elected student trustees at the table to represent the student voice. 54 Student trustees have a huge capacity to help develop new ideas, he says. Every student trustee is eager to take on new initiatives. Approaching student trustees can help to improve the idea and help advise on how it s implemented, and to make sure their programs are good enough to live in classrooms. Entrepreneurs need to co-create products with the education market. There needs to be back and forth working with allies and champions in the system, says Stephen Huddart. Unlike Bill Gates, you can t just buy your way in. You need to go through a co-creation process with partners. Above all, education entrepreneurs must remain flexible in the face of an immense and multi-faceted education system. Entrepreneurs should be open to alternative pathways into the classroom that can complement the traditional Ministry-board-principal-teacher quadrumvirate. Successful entrepreneurs have used some of the following access points to deliver innovative educational programming: teachers unions (e.g., Ontario Secondary School Teachers Federation), Toronto Public Health, social service organizations, immigration organizations (e.g., Settlement. org), Provincial Ministry of Health and Long-Term Care, Health Canada, Immigration and Citizenship Canada, professional teachers organizations (e.g., Science Teachers Association of Ontario), Ontario College of Teachers, antipoverty groups, private corporations, publishing companies, school trustees and direct media to students. ArtsSmarts ArtsSmarts was founded in 1998, through funding from the J. W. McConnell Family Foundation, to promote the importance of the arts in student development and education. This came at a time when school budgets for arts education were shrinking. The program uses the arts as a foundation to teach and inspire independent, creative thinking by students across all their subjects. This kind of experiential learning can have positive effects on struggling students, improving their levels of engagement. As a national initiative, ArtsSmarts uses a network model, working with 16 partners across Canada to bring professional artists into the classroom, using music, dance and theatre. The partnership organizations are a blend of both public and private sector organizations: school boards, corporations, arts organizations, Ministries of Education, Ministries of Culture, universities and provincial arts councils. Last year, these partnerships benefited more than 22,042 students in 171 different communities, bringing 1,480 artists and teachers together to collaborate on the development of 357 different ArtsSmarts projects in schools across the country. Since the beginning, ArtsSmarts has monitored the effect of its activities in schools, assessing the impact of their projects on student engagement and 21st century learning skills. They also work with their partners to study how the network model works to develop and share best practices. 18

19 Measuring impact It has become fashionable in many education circles to claim that the true value of education cannot be measured. Therefore, education entrepreneurs should not be burdened with providing evidence of the efficacy of their programs. Notwithstanding the imperfect metrics used in standardized tests, if entrepreneurs want to get their ventures to work in as many classrooms as possible, it behooves them to measure the results of their programs. The idea that policy and practice should be underpinned by rigorous evidence is internationally accepted, says a recent NESTA report, yet there is recognition that the level of rigour in evaluating what works in social policy remains limited. 55 Providing that rigour is a huge opportunity for education entrepreneurs to stand out from their lesseffective colleagues. Pathways to Education s Carolyn Acker is more blunt. What gets measured gets done. What is the point of doing all this work if you can t measure what you re doing? You have to prove what you re doing is having an impact. There are already well-established networks of researchers in education at universities in Canada, but access to these researchers is limited. Researchers at the Ontario Institute for Studies in Education (OISE) are working on everything from early childhood education to youth substance abuse. 56 There is then the challenge of accumulating solid data to show the efficacy of new programs and sharing that data with the wider community. In the US, Donors Choose is an online charity platform that connects individuals interested in supporting education to schools in need. Teachers request funding for projects ranging from supplies for an art project to school trips. Donors Choose recently ran a contest named Hacking Education to learn more from the data collected by their platform. According to their website, more than 165,000 teachers at 43,000 public schools have posted more than 300,000 classroom project requests, inspiring $80,000,000 in giving from 400,000 donors. The contest opened up their data for analysis and the building of apps. The implication is that revealing trends through data on what schools really need could help to drive funders resource decisions. CIVIX CIVIX is the alliance of two organizations with a significant history of engaging young Canadians: Operation Dialogue and Student Vote. Operation Dialogue was a not-for-profit organization that ran the Talk About Canada! Scholarship Program. Its mission was to get Canadians talking and thinking about Canada, to promote good citizenship and to help young Canadians understand what it means to be Canadian. Founded in 2002, Student Vote is a non-partisan organization working to engage young Canadians to participate in the democratic process. Student Vote works with educators to deliver experiential learning opportunities (primarily mock elections) for young Canadians to help them understand and practice their citizenship responsibilities. Its flagship program runs in elementary and secondary schools, parallel to official election periods. Student Vote has served more than two million students across Canada. It has also pioneered several democratic engagement initiatives in person, online and on television. Taylor Gunn, founding President of CIVIX, is a 2011 Ashoka Fellow. As a social enterprise, CIVIX provides contract services to supporters, which in turn funds their programming. CIVIX is planning to expand its offerings to increase its effectiveness and reach. The use of analytics to evaluate student performance and progress can have meaningful impact on how students are taught and assessed in the classroom. Automated assessments free teachers from having to grade assignments or tests, which saves time and allows them to make more informed decisions about students. The ability to provide real-time, continuous feedback also enhances the student experience. Bitstrips for Schools offers teachers a dashboard for real-time feedback. Teachers can view comics submitted by students that are ready for review or which students have yet to start their comic. 19

20 The question is how to quantify (or qualify) the success of education ventures outside the scope of standardized testing and how to measure so-called soft skills such as empathy, critical thinking, citizenship and self-confidence. It is widely recognized that these skills are integral to a functioning 21st century society and are more important than the rote learning and memorization skills that dominated 19th and 20th century education. But how do we measure these intangible assets? There is a balance to be struck between quantitative and qualitative assessment of education success. There are many ways to do this. Quantitative measurements could consist of course grades, grade averages, test grades, graduation rates, dropout rates, attendance or punctuality. Qualitative measurements could consist of self-evaluation surveys completed by students on intangibles such as self-confidence, empathy and their desire to attend school. Impact Reporting and Investing Standards (IRIS) is a common language or taxonomy hosted at the Global Impact Investing Network (GIIN). The initiative seeks to standardize how organizations communicate and report their social and environmental impact. They have developed a series of metrics that can be used for education ventures, both in financial terms and in measuring social impact and educational quality. 57 In North America, social entrepreneurs can apply for B Corporation (B-Corp) certification, which applies to businesses that meet comprehensive and transparent social and environmental performance standards. Education companies can take the B Impact Assessment questionnaire to see what impact they are having on stakeholders and to apply to become a B Corporation. Standards like IRIS, or certifications like B-Corp, effectively integrate social performance into business modeling and are integral for entrepreneurs looking to create more resilient business models in the education sector. Not only does this help to build a critical feedback loop for entrepreneurs, these transparent standards and metrics of success are of interest to governments, potential funders and administration looking to invest in the education sector. They can be a key point of differentiation for social entrepreneurs who want to distinguish themselves from a traditional business. The Coalition for Evidence-Based Policy in the US advocates using these types of metrics across the board when making decisions about public policy. In their mission, they wrote, When evaluated in scientifically rigorous studies, government-funded social interventions in areas such as K 12 education... are frequently found to be ineffective or marginally effective. 58 This should allow more space for independent social entrepreneurs to fill the gap left by ineffective programming. Pathways to Education provides one of the most direct examples of how to use metrics to prove the economic and social return on investment to stakeholders. When they began in 2001, they decided to focus on four single metrics credit accumulation, absenteeism, graduation rate and postsecondary participation to measure progress toward lowering the high school dropout rates for students in low-income areas such as Toronto s Regent Park. From 2001 to 2011, Pathways reduced the dropout rate in Regent Park from 56% to 11%. Figure 7: Since , Canada s high school dropout rate has decreased by almost half To further quantify the economic impact of this result, Pathways worked with Boston Consulting to further refine their statistics in Boston Consulting found: A return on investment of $24 for every dollar invested A net present value to society of $45,000 to $50,000 for every student enrolled A cumulative lifetime benefit to society of $600,000 for each graduate An internal rate of return of 10% 59 These trickle-down benefits all began with the organization s sole focus on decreasing dropout rates. As a result, in March 2011, the Canadian Federal Government funded the program to the tune of $20 million over four years to expand the model to low-income communities across Canada % Source: Statistics Canada 9%

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